29/04/2024. PT Bank Negara Indonesia (Persero) Tbk or BNI consistently recorded positive and sustainable financial performance growth in the early period of 2024.
BNI managed to record considerable performance in the development of the Micro, Small and Medium Enterprises (MSME) and consumer financing segments through subsidiaries PT Bank Hibank Indonesia (hibank) and BNI Finance as new growth engines outside of blue chip corporate loans that continue to grow.
This is reflected in the credit growth of hibank's MSME segment which reached 72% on an annual basis (Year on Year/YoY) and BNI Finance's financing growth which increased by 370% YoY dominated by consumer financing.
The credit performance of the two subsidiaries contributed to consolidated credit growth. BNI's total credit during the first quarter of 2024 was recorded at Rp695.16 trillion, growing 9.6% YoY when compared to the same period last year which reached IDR634.3 trillion.
With credit growth in the first quarter of 2024, BNI booked interest income of IDR 15.87 trillion, growing 7.2% YoY from the previous IDR 14.8 trillion, which was driven by the performance of a healthy intermediary function.
This strong growth was also supported by improved asset quality with gross Non Performing Loan (NPL) declining from 2.8% in Q1-2023 to 2.0% in Q1-2024. This was followed by credit cost which also decreased by 40 basis points YoY to 1.0% in the first quarter of 2024.
BNI President Director Royke Tumilaar said that improving asset quality remains a focus, which is expected to encourage sustainable intermediation function performance amid global geopolitical challenges, inflationary pressures, and interest rates.
In addition to healthy business growth, the company was also able to increase non-interest income in the form of fee-based income and loan recovery in the first quarter of 2024, reaching Rp5.1 trillion, a 15.9% rise over the previous IDR4.4 trillion.
With this growth, non-interest income now accounts for 35% of BNI's total revenue in the first quarter of 2024, primarily from securities fees and syndication fees.
BNI achieved a net profit of IDR5.33 trillion in the first quarter of 2024, a 2% year-on-year improvement, thanks to improving fundamentals such as increasing fee-based income, operational efficiency, and asset quality.
Royke further stressed that the company is still undergoing tranformation after three years in order to provide a robust and healthy level of profitability in the long term.
"BNI's fundamentals are getting healthier and stronger thanks to the transformation program which is our big step to continue to grow and develop and adapt to challenges at the national and global levels," said Royke.
Royke said BNI is on the right track to achieve its return on equity (ROE) profitability aspirations of up to 20% by 2028. This is supported by consistent and long-term asset growth from low-risk potential categories, as well as improving asset quality.
"With this transformation program, we consistently improve HR capabilities while optimizing technology as crucial enablers. We believe this will continue to drive improvements in business productivity, operational efficiency, and subsidiary contributions," Royke said.
BNI continues to undertake structural improvements as part of its transformation that has been carried out since early 2020. In the last four years, BNI has strengthened its capital structure, improved internal business procedures, and strengthened its organizational structure, all of which have had a substantial impact on BNI’s business growth.
Furthermore, the biggest challenge is the change in customer behavior that demands speed. To address this, BNI in 2024 will focus on the transformation of increasing the productivity of marketers (sales) in all regional offices and branches. This step seeks to enable BNI to provide excellence, responsive service while constantly providing solutions that meet customer needs.
The transformation to increase sales productivity includes increasing marketers' cross-selling capabilities, strengthening digital tools to support the sales process, and improving performance management, all of which can improve the effectiveness of sales operations.
"We believe that this transformation can have a positive impact on business growth and overall asset quality in the future," Royke said.
Meanwhile, regarding global geopolitical developments, exchange rates, inflationary pressures and interest rates, Royke said the company closely monitors all developments in order to make sound business decisions.
"With optimism for Indonesia's macroeconomic conditions which remain healthy and stable, BNI believes that the steps that have been taken will continue to support BNI's business growth in a sustainable manner," said Royke.
Royke explained that BNI has taken sensible and strategic actions to manage liquidity situations, particularly foreign currency funding, by collecting Third Party Funds (TPF) with efficient pricing policies. Aside from TPF sources, BNI leverages its excellent position in the worldwide market to secure additional funding options.
BNI recently issued global bonds worth US$500 million or around IDR7.95 trillion on April 5, 2024. Global investors responded positively to the issuance of Global Bonds with a 5-year tenor, with oversubscriptions reaching up to 6.4 times the planned value. The high confidence of global investors allowed BNI to reduce the bond yield to only 5.3% when bookbuilding was conducted.
The issuance of the global bonds was carried out prior to the USD exchange rate volatility against the rupiah, allowing BNI to acquire the best possible price. "This step aims to manage the risk of exchange rate fluctuations and lock in some of BNI's foreign exchange funding needs," said Royke.
As a strategic step going forward, BNI will be more careful in distributing foreign exchange-based credit needs and continue to monitor developments in the rupiah exchange rate, while continuing to maintain the quality of the foreign exchange credit portfolio.
"In addition, BNI also implements strict risk management by conducting stress tests on Indonesia's macroeconomic conditions, starting from exchange rate movements to future interest rates," added Royke.
Credit Grows Healthily
BNI Finance Director Novita Widya Anggraini said that BNI's fundamentals have proven solid in overcoming the challenges of the first quarter of 2024 which were influenced by external circumstances. BNI has also taken various anticipatory steps in managing risks connected to inflationary pressures, exchange rate fluctuations, and interest rate pressures.
Starting 2024, BNI's credit was mainly distributed to the private corporate credit segment amounting to IDR 272.1 trillion or growing 14% compared to the same period in 2023. BNI also recorded credit distribution to BUMN of IDR 102.7 trillion or growing 23% compared to the first quarter of 2023.
In the consumer credit segment, Home Ownership Credit (BNI Griya) also grew 10.3% YoY to IDR60.1 trillion. Meanwhile, Unsecured Credit grew 17% YoY to IDR52.1 trillion. Meanwhile, Credit Card growth also reached 10.4% YoY to IDR14.2 trillion.
"We see that all sectors are able to continue to grow positively, with quality and resilience, with a focus on the trade sector amidst global geopolitical pressure, exchange rates, inflation and rising interest rates," said Novita.
Furthermore, support for the MSME segment implemented by BNI Group also showed positive performance. This is shown by the extraordinary performance of two subsidiaries, namely hibank and BNI Finance.
Hibank's MSME lending increased by 72% year on year, whereas BNI Finance's funding increased by 370% year on year, primarily through consumer finance. This reflects the favorable influence of emerging business areas, which will become corporate strengths in the coming term.
According to Novita, hibank continually works to empower Indonesia's MSME ecosystem. The company believes that in the next five years, the performance of the intermediation function will be stronger in the MSME segment with a focus on digital channels.
"Seeing the huge potential of the MSME segment, BNI is committed to providing the best service through digital solutions. So, that's why we focus on developing hibank into a fundamentally strong digital bank," said Novita.
Novita explained that the credit growth was supported by the growth of Third Party Funds (TPF) which reached IDR780.23 trillion or grew 4.9% compared to the same period in 2023 along with the increase in low-cost fund-based transactions, where the contribution of Current Account Savings Account (CASA) still dominated by IDR543.50 trillion or 69.7% of total TPF. BNI's CASA increased by 6.0% compared to the first quarter of 2023.
"We are aware of the trend of rising interest rates which has an impact on the increase in the cost of funds in the first quarter of 2024, resulting in a decrease in margins. However, the net interest margin (NIM) can still be maintained at 4%," said Novita.
Novita further said that in the first quarter of this year, BNI's asset quality was also recorded as improving, as seen from the decrease in the Non Performing Loan (NPL) ratio and the Loan at Risk (LaR) ratio.
The gross NPL ratio at the end of Q1-2024 fell to 2.0%, much lower than Q1-2023 which was recorded at 2.8%. Next, the Loan at Risk ratio fell to 13.3% from the previous year at 16.3%.
BNI Digital Banking Growth
Novita added, BNI continues the digital banking growth which is one of the company's main agendas. BNI consistently improves its capabilities and continues to be innovative in developing digital financial solutions that suit customer needs, especially in the retail segment through BNI Mobile Banking.
The number of BNI Mobile Banking users in the first quarter of 2024 reached 16.9 million or grew 18.5% YoY. This growth is in line with the transaction value which was able to reach IDR 347 trillion in the first quarter of 2024, growing 35.9% YoY. Meanwhile, the number of transactions grew 54.9% YoY to 318 million.
"This achievement is a reflection that we are on the right track in the digital transformation that runs smoothly following customer needs," she said.
Novita said that BNI Mobile Banking has become a Super Apps Ecosystem that presents financial solutions for daily needs, wealth management, digital lifestyle, digital loans & credit cards, personal financial management, experience & engagement, and a number of value added services.
"Through BNI Mobile Banking, we continue to expand our services by utilizing our ecosystem to answer every customer need in this modern digital banking era. This aims to help customer growth from just doing basic transactions to achieving their financial goals," she said.
Not only BNI Mobile Banking has increased, BNI's leading digital solutions in the wholesale segment, namely BNIDirect and BNI Open API, have also shown significant performance improvements.
"BNIDirect transaction volume and items in Q1-2024 grew by 11.6% and 9% YoY respectively. Meanwhile, BNI Open API currently remains committed to service excellence, by offering a variety of API services ranging from payment services, collections, transfers, and many more. This is shown in the API transaction performance per Q1-2024, where API transaction volume and items each grew by 23% YoY," explained Novita.
In 2023, BNI Open API has successfully won several international awards, as proof of the company's commitment to superior services based on digital innovation.
Through BNI Open API, the company continues to strive to provide a digital platform that holistically addresses needs, optimizing partner channels to provide integrated and seamless financial solutions.
Sustainability, the Heart of BNI's Business
Risk Management Director David Pirzada said, as a state-owned bank that is the driving force behind the implementation of Sustainable Finance in Indonesia, BNI continues to be committed to internalizing the principles of sustainable finance.
According to David, sustainability has become the heart of BNI's business. One of the initiatives undertaken is to set a Net Zero Emission (NZE) target for BNI's operational activities in 2028 and financing in 2060. BNI will encourage a number of initiatives both in terms of operations and funding.
BNI's green credit distribution has grown at an average annual growth rate (CAGR) of 23%, with a value reaching IDR67.4 trillion at the end of March 2024, compared to IDR29.5 trillion at the end of December 2020. The distribution of green credit has a portion of 14.2% of the total wholesale loan, while in December 2020 the portion was only 7.8%.
"One form of green credit distribution is financing the acquisition of the Sidrap Wind Power Plant (PLTB) in South Sulawesi with a capacity of 75 Megawatt Peak (MwP) worth IDR 1.6 trillion," he said.
On the other hand, BNI has succeeded in optimizing the distribution of green bonds amounting to IDR 5 trillion to the renewable energy sector, environmentally friendly transportation, waste processing, environmentally friendly buildings, and natural resource management.
BNI's distribution of green bonds has helped to reduce greenhouse gas emissions, produce clean energy, save energy, recycle a variety of wastes, and ensure the sustainability of natural resources.
BNI also paid special attention to the transition risks faced by debtors and has implemented a Sustainability Linked Loan (SLL) to encourage the implementation of ESG principles including debtors' energy transition.
As of the end of March 2024, BNI has distributed SLL worth IDR 4.9 trillion to top tier companies in the cement, steel and agro-industry processing industries.
"As proof of BNI's achievements in sustainable financial management, at the end of March 2024 BNI also managed to maintain an A Rating from MSCI and a Medium Risk Rating from Sustainalytics with a score of 21.4," he concluded.